Cibil CEO Bhavesh Jain on War Impact, Gold Loans, and Retail Credit Quality

TransUnion Cibil CEO Bhavesh Jain urges lenders to proactively engage with customers on credit usage and repayment, drawing parallels to the successful strategies implemented during the Covid-19 pandemic, as the financial sector closely monitors the evolving impact of the Iran war on retail credit quality and gold loan dynamics.

IMAGE: Israeli soldiers stand next to tanks near the Israeli side of the border with Lebanon, amid escalation between Iran-backed Hezbollah and Israel and the US-Israeli conflict with Iran, in northern Israel. Photograph: Tyrone Siu/Reuters

The retail portfolio quality of lenders improved in January over December across secured and unsecured segments, but the impact of the Iran war is yet to be seen and is being monitored, said Bhavesh Jain, managing director and chief executive officer of credit bureau TransUnion Cibil.

The microloan against property (LAP), commercial vehicle and construction equipment segments are yet to recover, he told Business Standard.

Lender-Borrower Engagement Crucial

“Lenders will need to continuously hand-hold borrowers in terms of need-based and responsible credit usage, and ensure disciplined repayment behaviour. Looking at major events in the recent past, particularly during the Covid-19 period, Indian markets performed well largely due to strong coordination and hand-holding among all stakeholders,” Jain said.

The moratorium helped borrowers, but the most important factor was lenders engaging with borrowers and advising them on credit use and timely repayment.

“That engagement was key during the Covid-19 period.

“A similar approach needs to be followed in the current environment as well.

“While lenders are already doing this, there is an opportunity to further strengthen these efforts given the prevailing circumstances,” he said.

Bankers have said that if the war, which began on February 28, continues, it could have implications for their portfolio quality in Q1 FY27, if not in the March quarter of FY26.

Credit Market Indicator and Gold Loan Surge

Cibil’s quarterly report said India’s Credit Market Indicator (CMI) increased to 102 in December from 100 in September, supported by strong growth in gold loans amid a sharp rise in global gold prices.

According to the report, retail credit supply normalised in the post-festival period, easing from the momentum created by the rationalisation of goods and services tax (GST) last September and returning to end of 2024 levels, indicating a seasonal moderation in short-term demand. A higher CMI reading indicates improving credit market health and a lower one marks a decline.

The report highlighted that a critical factor in gold loan growth in the December 2025 quarter was the sharp rise in underlying asset values, which have doubled since March 2023.

Average ticket sizes increased by 1.8x in the same period, indicating that as gold valuations rise, consumers are leveraging higher-value loans to finance their needs.

This has made gold loans the largest product by share of retail originations in volume (36 per cent) and value (39 per cent), and the second largest by outstanding balances (11 per cent) after housing.

Evolving Gold Loan Demographics

“We have observed a direct correlation between gold prices and the average ticket size of gold loans.

“There is also a notable geographic diversification in gold loan originations.

“While historically concentrated in southern states, we are now seeing meaningful growth in states such as Rajasthan, Uttar Pradesh, and Madhya Pradesh.

“In terms of borrower profile, gold loans have traditionally been preferred by individuals aged 35 and above.

“However, there is now increasing participation from borrowers below 35 years of age.

“Women borrowers — particularly in semi-urban and rural areas — are playing an important role in driving demand,” Jain said.

Portfolio Quality and Future Outlook

Gold prices have corrected sharply from their peak at the end of January, partly due to the Iran war.

According to Jain, the gold loan portfolio quality has improved.

As of December 2025, delinquency stands at 0.6 per cent.

“While part of this improvement can be attributed to a base effect — given that the gold loan book has been among the fastest-growing segments in the market — the overall asset quality remains strong,” he said, adding that they are yet to see the impact from more recent developments.

“In terms of implications for portfolio quality, these will become visible over time, as that is how the data gets reported to us.

“We are closely monitoring the situation”, he said.

According to Cibil, 90+ days past due (DPD) delinquencies across key segments improved as of December 2025, pushing the performance Credit Market Indicator (CMI) up six points year-on-year to 107.

The microloan Loan Against Property (LAP) segment was an outlier, with 90+ DPD delinquency rising 35 basis points to 3.1 per cent.

Despite this, delinquency levels remain broadly stable and range-bound since the previous quarter.

“We are assessing whether there is any impact from a war-related perspective on other credit segments.

“However, this is something that will become clearer in the coming period and remains under close watch,” Jain said.